<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
NORTH PITTSBURGH SYSTEMS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
<PAGE>
- -------------------------------------------------------------------------------
IT WILL ASSIST MATERIALLY IN THE PREPARATION FOR THE ANNUAL MEETING
IF SHAREHOLDERS RETURN THEIR PROXIES PROMPTLY.
- -------------------------------------------------------------------------------
NORTH PITTSBURGH SYSTEMS, INC.
4008 GIBSONIA ROAD
GIBSONIA, PENNSYLVANIA 15044-9311
TELEPHONE NO. 724-443-9600
------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 21, 1999
------------
The Annual Meeting of Shareholders of North Pittsburgh Systems, Inc. will be
held on Friday, May 21, 1999 at 2:00 p.m., Eastern Daylight Saving Time, at
the Sheraton Inn Pittsburgh North (Warrendale), 910 Sheraton Drive, Mars,
Pennsylvania, for the purpose of considering and acting upon the following
matters, as described in the accompanying Proxy Statement:
1. To elect Directors.
2. To transact such other business as may properly come before the meeting
or any adjournments thereof.
The Board of Directors has fixed the close of business on April 13, 1999 as
the record date for the determination of Shareholders entitled to notice of
and to vote at the meeting.
You are cordially invited to attend the meeting. If you are unable to do so,
please sign and date the enclosed proxy and return it promptly by mail in the
enclosed envelope. No postage is required if mailed in the United States.
By Order of the Board of Directors
N. William Barthlow
Secretary
Dated: Gibsonia, PA
April 23, 1999
<PAGE>
NORTH PITTSBURGH SYSTEMS, INC.
4008 Gibsonia Road
Gibsonia, Pennsylvania 15044-9311
Telephone No. 724-443-9600
------------
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD
MAY 21, 1999
------------
GENERAL
This Statement is furnished in connection with the solicitation by and on
behalf of the Board of Directors of North Pittsburgh Systems, Inc. (North
Pittsburgh or Company) of Proxies to be used at the Annual Meeting of
Shareholders of the Company and any adjournments thereof, to be held at the
Sheraton Inn Pittsburgh North (Warrendale), 910 Sheraton Drive, Mars,
Pennsylvania, on May 21, 1999 at 2:00 p.m., Eastern Daylight Saving Time for
the purposes set forth in the accompanying Notice of Annual Meeting of
Shareholders. The Board of Directors has fixed the close of business on April
13, 1999 as the record date for the determination of Shareholders entitled to
notice of and to vote at the Annual Meeting.
It is anticipated that this Proxy Statement and accompanying proxy card
(Proxy) will be mailed to Shareholders for the first time on or about April
23, 1999. Shares represented by a valid Proxy received in time for voting will
be voted in accordance with the Shareholder's instructions. If no such
instructions are specified, the Proxy will be voted FOR each of the nominees
for election as a Director. Proxies and notices of revocation should be mailed
or delivered to the Company's transfer agent, Norwest Shareowner Services,
P.O. Box 64873, St. Paul, MN 55164-0873, for receipt by Norwest Bank
Minnesota, N.A. no later than two (2) business days prior to the 1999 Annual
Meeting of Shareholders, or should be deposited with the Chairman or the
Secretary of the Company immediately prior to the commencement of the 1999
Annual Meeting.
The Company will bear the cost of solicitation of proxies. In addition to
the use of the mails, the Company, if necessary, may use its officers and its
regular employees, who will receive no compensation in addition to regular
salary or pay, to solicit proxies from Shareholders, either personally, by
telephone, facsimile, telegraph or letters. Arrangements will be made by the
Company with brokers and other custodians, nominees and fiduciaries to forward
solicitation material to the beneficial owners of the shares held of record,
and the Company will reimburse these persons for reasonable out-of-pocket
expenses incurred.
VOTING RIGHTS
Only Shareholders of record at the close of business on April 13, 1999 are
entitled to notice of and to vote at the Annual Meeting and any adjournments
thereof. At that date, the Company had outstanding and entitled to vote
15,005,000 shares of Common Stock. Holders of Common Stock are entitled to one
vote for each share held in respect to the election of Directors. Proxies will
be received and tabulated by Norwest Bank Minnesota, N.A., Shareowner
Services, with the results thereof reported to the three (3) Judges of
Election appointed by the Company's Board of Directors under the authority of
the Bylaws of the Company and the Pennsylvania Business Corporation Law.
Election as a Director requires a favorable vote of the majority of the total
shares represented at the meeting. The total shares represented includes
abstentions, withheld votes and broker non-votes.
STOCK OWNERSHIP
As of March 12, 1999, Armstrong Utilities, Inc. (Armstrong), a Pennsylvania
corporation, the principal business of which is cable television and all of
the stock of which is owned by Armstrong Holdings, Inc., a
1
<PAGE>
Delaware corporation, held of record 935,740 shares or 6.24% of the Company's
15,005,000 shares of outstanding Common Stock. As of that date, no other
entity or individual held of record more than 5% of such stock. A Schedule 13D
and amendments thereto have been filed with the Securities and Exchange
Commission on the joint behalf of (i) Armstrong, (ii) Armstrong Holdings, Inc.
(holder of 297,996 shares), (iii) the Sedwick Foundation (holder of 34,638
shares), (iv) the Jud L. Sedwick Family Trust No. 2 (holder of 400 shares) and
(v) Director Jay L. Sedwick and his spouse, Jay L. Sedwick's son, his brother-
in-law and his spouse, an unrelated officer of Armstrong and Armstrong
Holdings, Inc., and his spouse and certain other persons, both individually
and in respect of certain of their capacities as officers of Armstrong and
Armstrong Holdings, Inc. The aggregate beneficial ownership at March 12, 1999
of those filing the Schedule 13D, or subject to the reporting requirements
thereof, was 1,316,756 shares or 8.78% of the Company's outstanding Common
Stock. Each of such persons disclaimed any membership in any "group" as such
term is defined in Rule 13d-5 under the Securities Exchange Act of 1934 and
the reporting persons have indicated that the stock has been acquired for
investment.
The following table sets forth information with respect to all persons known
to the Company who could be beneficial owners of more than 5% of the Company's
voting securities as of March 12, 1999 including those persons who by virtue
of their relationship to Armstrong and Armstrong Holdings, Inc. might be
deemed to be beneficial owners of the North Pittsburgh stock held by those
corporations:
Table I
Beneficial Owners of More Than 5%
of Outstanding Voting Securities
<TABLE>
<CAPTION>
(2) (3) (4)
(1) Owner's Name and Amount and Nature Percent
Title of Class Business Address of Ownership of Class
- -------------- ------------------------- ----------------- --------
<S> <C> <C> <C> <C>
Common Stock Armstrong Utilities, Inc. 935,740 Direct 6.24%
One Armstrong Place
Butler, PA 16001
Common Stock Jay L. Sedwick 6,000 Direct 0.04%
One Armstrong Place 1,286,536 Indirect (1) 8.57%
Butler, PA 16001
Common Stock William C. Stewart 3,100 Direct 0.02%
One Armstrong Place 1,273,374 Indirect (2) 8.49%
Butler, PA 16001
Common Stock Kirby J. Campbell 10,600 Direct 0.07%
One Armstrong Place 1,268,774 Indirect (3) 8.46%
Butler, PA 16001
Common Stock Dru A. Sedwick 1,250 Direct .008%
One Armstrong Place 1,233,736 Indirect (4) 8.22%
Butler, PA 16001
</TABLE>
- --------
(1) Jay L. Sedwick, a Director of the Company, is Chairman of the Board and
Director of Armstrong and of Armstrong Holdings, Inc. If he were deemed
the beneficial owner of the 935,740 and 297,996 shares respectively held
by such corporations, the 34,638 shares held by the Sedwick Foundation, of
which Jay L. Sedwick is a Co-Trustee, the 400 shares held by the Jud L.
Sedwick Family Trust No. 2, of which Jay L. Sedwick is a Co-Trustee, and
the 17,762 shares held by Citrus Enterprises, L.P., a Delaware limited
partnership which handles diversified investments, of which Jay L. Sedwick
is a partner, his indirect beneficial ownership would total 1,286,536
shares.
(2) William C. Stewart, brother-in-law of Jay L. Sedwick, is a Director and
Chief Executive Officer of Armstrong and a Director and Secretary of
Armstrong Holdings, Inc. If he were deemed the beneficial
2
<PAGE>
owner of the 935,740 and 297,996 shares respectively held by such
corporations, the 5,000 shares held individually by his wife and the
34,638 shares held by the Sedwick Foundation, of which William C. Stewart
is a Co-Trustee, his indirect beneficial ownership would total 1,273,374
shares.
(3) Kirby J. Campbell is a Director, Executive Vice President and Treasurer of
Armstrong and a Director, Chief Executive Officer and Treasurer of
Armstrong Holdings, Inc. If he were deemed the beneficial owner of the
935,740 and 297,996 shares respectively held by such corporations, the
34,638 shares held by the Sedwick Foundation, of which Kirby J. Campbell
is a Co-Trustee, and the 400 shares held by the Jud L. Sedwick Family
Trust No. 2, of which Kirby J. Campbell is a Co-Trustee, his indirect
beneficial ownership would total 1,268,774 shares.
(4) Dru A. Sedwick, son of Jay L. Sedwick, is a Director, Executive Vice
President and Secretary of Armstrong and a Director and President of
Armstrong Holdings, Inc. If he were deemed the beneficial owner of the
935,740 and 297,996 shares respectively held by such corporations, his
indirect beneficial ownership would total 1,233,736 shares.
The following table sets forth information with respect to the beneficial
ownership as of March 12, 1999 of individual Directors, Nominees and of all
Directors, Nominees and Officers as a Group:
Table II
Security Ownership of Management
<TABLE>
<CAPTION>
(2) (3) (4)
(1) Name of Amount and Nature Percent
Title of Class Beneficial Owner of Ownership (1) of Class
- -------------- ---------------- ----------------- --------
<S> <C> <C> <C> <C>
Common
Stock Harry R. Brown 19,878 Direct (2) 0.13%
19,416 Indirect (3) 0.13%
Common
Stock Charles E. Cole 52,028 Direct (4) 0.35%
21,972 Indirect (5) 0.15%
Common
Stock Allen P. Kimble 1,129 Direct (6) .008%
Common
Stock Stephen G. Kraskin 1,000 Direct .007%
Common
Stock David E. Nelsen 2,500 Direct (7) .02%
Common
Stock Jay L. Sedwick 6,000 Direct 0.04%
1,286,536 Indirect (8) 8.57%
Common
Stock Charles E. Thomas, Jr. 23,710 Direct (9) 0.16%
21,000 Indirect (10) 0.14%
Common
Stock All Directors, Nominees and Officers 121,855 Direct 0.81%
as a Group (14 Persons) 1,352,974 Indirect (11) 9.02%
</TABLE>
- --------
(1) Included in the shares set forth in the table above are (a) shares
beneficially owned by the Director/Nominee, his wife, minor children, and
relatives living in his house, and, includable in such table under rules
of the Securities and Exchange Commission and (b) shares which are deemed
to be beneficially owned because the Director/Nominee has voting power or
power of disposition with respect to the shares. Share amounts are
reported as of March 12, 1999 and percentages of share ownership are
calculated based upon 15,005,000 shares of Common Stock outstanding as of
that date.
(2) Of the 19,878 shares directly owned by Harry R. Brown, 1,354 shares are
held jointly with his wife.
(3) The 19,416 shares indirectly owned by Harry R. Brown are held
individually by his wife.
(4) Of the 52,028 shares directly owned by Charles E. Cole, 32,272 shares are
held jointly with his wife.
3
<PAGE>
(5) The 21,972 shares indirectly owned by Charles E. Cole are held
individually by his wife.
(6) The 1,129 shares directly owned by Allen P. Kimble are held jointly with
his wife.
(7) The 2,500 shares directly owned by David E. Nelsen are held jointly with
his wife.
(8) For information with respect to the 1,286,536 shares indirectly owned by
Jay L. Sedwick, please refer to Note 1 to Table I above.
(9) Of the 23,710 shares directly owned by Charles E. Thomas, Jr., 11,800
shares are held jointly with his wife.
(10) The 21,000 shares indirectly owned by Charles E. Thomas, Jr., are held by
him under the PA Uniform Transfers to Minors Act as custodian for five
children.
(11) The 1,352,974 shares indirectly owned by all Directors, Nominees and
Officers as a Group include the 1,286,536 shares indirectly owned by Jay
L. Sedwick and described in Note 1 to Table I above.
No Director, Nominee, officer or "group" as defined in Rule 13d-5 under the
Securities Exchange Act of 1934 is a beneficial owner of more than 5% of the
Company's Common Stock by virtue of any voting trust or similar arrangement.
MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING
ELECTION OF DIRECTORS
The Bylaws provide that North Pittsburgh shall be managed by a Board of
Directors of not less than seven (7) nor more than nine (9) members and that
the number of Directors to be elected shall be determined by the Board of
Directors prior to the Annual Meeting at which such Directors are to be
elected. The Board of Directors has established the number of Directors at
seven (7) for the coming year.
The persons named in the following table will be nominated for election as
Directors of North Pittsburgh to serve until the 2000 Annual Meeting of
Shareholders and until their successors are elected. Harry R. Brown, Dr.
Charles E. Cole, Allen P. Kimble, Jay L. Sedwick and Charles E. Thomas, Jr.
are present Directors of North Pittsburgh and were elected at the 1998 Annual
Meeting of Shareholders. Stephen G. Kraskin and David E. Nelsen are new
nominees. The number of shares of Common Stock represented by proxy at the
1998 Annual Meeting of Shareholders held May 15, 1998 was 13,279,011 or 88.5%
of the 15,005,000 outstanding shares of such stock on that date.
It is the intention of the proxies to vote for the election of seven (7)
Directors and unless authority to vote for any or all individual nominees is
withheld, it is the intention of the proxies to vote for the election of the
nominees listed in the following table. If any of the following nominees
should become unavailable as a candidate for any reason, which is not
anticipated, the Board of Directors in its discretion may designate a
substitute nominee, in which event votes will be cast for such substitute
nominee pursuant to the accompanying Proxy.
The information in the table which follows includes as to each such nominee,
the nominee's age, the year in which service commenced as a Director of North
Pittsburgh, the nominee's current positions and offices held with North
Pittsburgh, the nominee's business experience during the past five years and
certain other information. Individual shareholdings of each nominee may be
found above in Table II, Security Ownership of Management.
4
<PAGE>
NOMINEES FOR ELECTION AS DIRECTORS
AND INFORMATION CONCERNING THEM
Biographical Summaries of Nominees/1/
Unless otherwise specified, "North Pittsburgh" as used below means North
Pittsburgh Systems, Inc. since May 31, 1985 and North Pittsburgh Telephone
Company, its predecessor, before that date. Positions and experience related
only to North Pittsburgh Telephone Company, the Company's principal
subsidiary, are also presented.
HARRY R. BROWN Director of North Pittsburgh since 1989
President of North Pittsburgh Systems, Inc. and President and General Manager
of North Pittsburgh Telephone Company
Mr. Brown, 62, has been President of North Pittsburgh Systems, Inc. and
President and General Manager of North Pittsburgh Telephone Company since
January 30, 1998. He was Vice President of North Pittsburgh Systems, Inc. from
1992 to January 30, 1998. Mr. Brown also held the following North Pittsburgh
positions: Vice President--Operations from 1987 to January 30, 1998, Assistant
Vice President--Operations from 1986 to 1987, Network Engineering Manager from
1984 to 1986 and Equipment Supervisor from 1975 to 1984.
DR. CHARLES E. COLE Director of North Pittsburgh since 1968
Retired Physician
Dr. Cole, 68, is a retired physician who previously practiced with the Cole-
Lechmanick division of Genesis Medical Associates in the Town of McCandless,
PA.
ALLEN P. KIMBLE Director of North Pittsburgh since January 30, 1998
Vice President and Treasurer of North Pittsburgh Systems, Inc. and North
Pittsburgh Telephone Company
Mr. Kimble, 52, has been Vice President since 1989 and Treasurer since 1985
of North Pittsburgh Systems, Inc. and Vice President since 1989 and Treasurer
since 1979 of North Pittsburgh Telephone Company. Mr. Kimble also held the
following North Pittsburgh positions: Secretary from 1993 to January 30, 1998,
Assistant Vice President from 1987 to 1993, Assistant Secretary from 1979 to
1993, Assistant Secretary-Treasurer from 1977 to 1979 and Assistant to Vice
President--Finance from 1976 to 1977.
STEPHEN G. KRASKIN New Nominee
Partner of Kraskin, Lesse & Cosson, LLP
Mr. Kraskin, 48, is an attorney and managing partner in the legal and
consulting firm of Kraskin, Lessee & Cosson, LLP, which he founded in 1992.
Mr. Kraskin's professional practice is concentrated in the provision of legal,
regulatory and business planning services to a wide variety of
telecommunications companies. Prior to
- --------
/1/Unless otherwise indicated, a nominee has had the same principal occupation
for the past five years. Only directorships in companies with a class of
equity securities registered pursuant to the Securities Exchange Act of 1934,
or otherwise subject to its periodic reporting requirements, are listed. No
corporation or organization listed herein is a parent, subsidiary or other
affiliate of North Pittsburgh Systems, Inc. or its subsidiaries. There are no
arrangements or understandings among any director, nominee, North Pittsburgh
Systems, Inc. or its subsidiaries or any other person pursuant to which a
director or nominee was or is to be selected.
5
<PAGE>
entering private practice, he was General Counsel to a telecommunications
consulting firm, and served as Deputy General Counsel of the National
Association of Regulatory Utility Commissioners. Mr. Kraskin holds a BA Degree
from Emory University and a JD Degree from American University.
DAVID E. NELSEN New Nominee
Chief Executive Officer of CoManage Corporation
Since July, 1998, Mr. Nelsen, 38, has been Chief Executive Officer of
CoManage Corporation, a telecom network management software company.
Previously, from 1996-1998, he was Senior Director at FORE Systems, a local
high technology manufacturing company, with responsibility for product
management and marketing of FORE's service provider products, business
planning and strategy. Prior thereto, he served as FORE's Director of
Marketing from 1994 to 1996 with responsibility for video and telco product
management and marketing. Before joining FORE, Mr. Nelsen held a variety of
positions during almost 12 years at AT&T, including ATM Service Product
Manager at AT&T Business Communication Services (1991-1994) and Private Packet
Network Services Technical Manager at AT&T Bell Laboratories (1982-1991). Mr.
Nelsen holds a BS Degree in Systems Engineering from the University of Arizona
and an MS Degree in Operations Research from Stanford University.
JAY L. SEDWICK Director of North Pittsburgh since 1980
Chairman of the Board and Director of Armstrong Utilities, Inc.
Mr. Sedwick, 64, is Chairman of the Board and Director in a number of
companies comprising the Armstrong Group of Companies (engaged in the business
of telephony, cable television, home security and real estate in several
states). He has been the Chairman of Armstrong Utilities, Inc. in Butler, PA
since 1993 and was President and Chief Executive Officer of the same company
from 1988 to 1997. Mr. Sedwick also served in various officer capacities for
Armstrong Utilities, Inc. from 1963 to 1988.
CHARLES E. THOMAS, JR. Director of North Pittsburgh since 1993
Chairman of Board of Directors of North Pittsburgh
Mr. Thomas, Jr., 56, has been Chairman of the Board of Directors of North
Pittsburgh since May 15, 1998. Mr. Thomas, has also been a partner in the law
firm of Thomas, Thomas, Armstrong & Niesen, Harrisburg, PA, since the
formation of this firm in 1991, concentrating in public utility, securities
regulation and corporate law. Previous thereto, he was a partner in the law
firm of Thomas & Thomas from 1977 to 1990. Thomas, Thomas, Armstrong & Niesen
is retained as general counsel for North Pittsburgh and was paid a total of
$197,525 in fees during 1998.
Committees and Meetings of the Board
The Board of Directors held twelve meetings during 1998. Prior to the
dissolution of the Executive Committee on May 15, 1998, Charles E. Thomas,
Sr., Chairman of the Committee, Charles E. Cole, Frank D. Reese and Harry R.
Brown served, without additional compensation, as an Executive Committee of
North Pittsburgh Systems, Inc. and subsidiaries with full power of the Board
of Directors when the Board was not in session and action was considered
necessary and in the best interests of each company. One Executive Committee
meeting was held in 1998. Jay L. Sedwick, Chairman of the Committee, Charles
E. Cole, Richard R. Kauffman, Charles E. Thomas, Jr. and Barton B. Williams
served, without additional compensation, as a Compensation Committee and, in
respect to compensation for 1998, held six meetings (see Compensation
Committee Report on Executive Compensation). Charles E. Thomas, Jr., Chairman
of the Committee, Richard R. Kauffman, Jay L. Sedwick, Barton B. Williams and
Allen P. Kimble served, without additional compensation, as a standing Audit
Committee. No Audit Committee meetings were held in 1998. The Company did not
have a
6
<PAGE>
standing nominating committee during 1998, but rather acted as a committee of
the whole with respect to this function. A Nominating Committee was formed in
1999 with Jay L. Sedwick, Chairman of the Committee, Harry R. Brown, Charles
E. Cole and Charles E. Thomas, Jr., serving without additional compensation.
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
Executive Compensation Table. The Executive Compensation Table below shows
the total compensation of Harry R. Brown, Allen P. Kimble and N. William
Barthlow, the only Executive Officers whose compensation exceeded $100,000
during 1998.
Executive Compensation Table(1)
<TABLE>
<CAPTION>
(c)
Annual (i)
(a) (b) Compensation All Other
Name and Principal Position Year Salary Compensation(2)
- --------------------------- ---- ------------ ---------------
<S> <C> <C> <C>
Harry R. Brown* 1998 $160,038 $ 5,373
1997 130,125 16,521
1996 119,500 15,932
Allen P. Kimble** 1998 $137,993 $ 4,614
1997 115,150 4,061
1996 105,200 3,682
N. William Barthlow*** 1998 $124,585 $ 4,360
1997 105,100 3,735
1996 96,400 3,374
</TABLE>
- --------
* President since January 30, 1998 and Vice President from 1992 to 1998 of
North Pittsburgh Systems, Inc.; President and General Manager since
January 30, 1998 and Vice President--Operations from 1987 to 1998 of North
Pittsburgh Telephone Company. Mr. Brown was also a Director of both
companies in all three years.
** Vice President since 1989, Treasurer since 1985 and a Director since
January 30, 1998 of both companies.
*** Vice President since 1994, Secretary since January 30, 1998 and Assistant
Secretary from 1993 to 1998 of North Pittsburgh Systems, Inc.; Vice
President--Marketing and Revenues since 1994, Secretary since January 30,
1998 and Assistant Secretary from 1993 to 1998 of North Pittsburgh
Telephone Company.
Notes to Executive Compensation Table:
(1) The Executive Compensation Table reflects salary and Company contributions
to a defined contribution plan. The Table also reflects Director fees paid
to Harry R. Brown in 1997 and 1996. Beginning in 1998, inside Directors
received no additional compensation for serving on the Board of Directors.
No other forms of compensation such as Bonus, Restricted Stock Awards,
Stock Appreciation Rights, Options or Long Term Incentive Payments were in
effect during 1998. In addition, during 1998, no one participated in the
Deferred Compensation Plan.
(2) In 1998, annual contributions were made to the North Pittsburgh Telephone
Company Employees' Savings and Retirement Plan (401-K) for the benefit of
Messrs. Brown, Kimble and Barthlow.
Compensation Committee Report on Executive Compensation. A meeting of the
Compensation Committee, consisting of Chairman Jay L. Sedwick and Directors,
Charles E. Cole, Richard R. Kauffman, Charles E. Thomas, Jr. and Barton B.
Williams, met on November 25, 1997 for the purpose of considering executive
compensation for Calendar Year 1998. Prior to the meeting, an
information/recommendations packet
7
<PAGE>
had been furnished to all members of the Committee containing information
regarding 1996 and 1997 salary levels for all officers and department heads,
an explanation of the management group salary structure which had been used
over the past eight years based upon the Hay Group method, summaries of the
day-to-day responsibilities of various officers, North Pittsburgh's
organizational charts, compensation levels for certain other
telecommunications companies based upon 1994, 1995 and 1996 data in Proxy
Statements filed with the Securities and Exchange Commission (SEC) during 1997
and then President and General Manager Gerald A. Gorman's recommended officer
salary levels for 1998. In connection with the compensation levels of other
telecommunications companies, the Committee considered the operational
comparability of these companies with North Pittsburgh and the comparability
of their compensation packages with North Pittsburgh.
The Committee also conducted an in depth analysis of North Pittsburgh's
existing salary structure and the matter of paying separate director's fees to
full time salaried officers. It was the consensus of the Committee that the
more common practice of including directors' service within the salary
structure itself would be more appropriate and that separate directors' fees
should no longer be paid to officers who serve on the Board.
In addition, North Pittsburgh's past practice of increasing officers'
salaries on a percentage basis was considered at length. In view of the
problem of percentage increases failing to truly reflect changing
responsibilities and performances, it was concluded that this practice was no
longer appropriate, but rather that dollar increases based upon merit would be
more appropriate especially in closing disproportionate salary levels and
reflecting changes in responsibilities. The possible employment of a
compensation consultant and the use of consultants by other companies was
likewise discussed as were the pros and cons of establishing targets and/or
goals as a basis for salary increases or bonuses.
In preparing its recommendation of salaries for each individual officer, the
Committee considered each officer's past performance, any new
responsibilities, the relationship of his present salary with that of other
officers and other members of the management group and the roll-in of
directors' fees for officers serving on the Board. A salary recommendation for
each officer was then adopted by the Committee and subsequently considered and
approved by the Board of Directors, including a recommendation to consider the
employment of a compensation consultant.
Six meetings of the Compensation Committee were held during 1998. The first
was on February 3, 1998 for the purpose of considering whether any salary
adjustments were appropriate for executive officers, Harry R. Brown, Allen P.
Kimble and N. William Barthlow, who were promoted at the January 30, 1998
meeting of the Company's Board of Directors. The present salaries for each
officer, his duties prior to promotion and the expanded duties his new
position would require were reviewed along with his employment history with
the Company and its subsidiaries. The matter of officers serving on the Board
of Directors was likewise discussed and it remained the consensus of the
Committee that any officer serving on the Board should not receive additional
compensation as a Director. Accordingly, it was felt that the salary
adjustment for Mr. Kimble should be based upon his expanded responsibilities
as an officer, not his election to the Board. Also considered were the
relationship of each officer's present salary with that of other officers and
other members of the management group. A recommendation was then adopted to
increase the salaries of Harry R. Brown, Allen P. Kimble and N. William
Barthlow and approved by the entire Board at its February 27, 1998 meeting.
A second 1998 meeting of the Compensation Committee was held on February 25,
1998 at which action was taken to recommend the employment of Peter R. Johnson
& Company (Johnson) to conduct an executive compensation study and to make
recommendations to the Committee. The Johnson Report was considered at
meetings of the Compensation Committee held on August 10 and August 25, 1998.
Also considered at the meetings were various fringes and executive perks and
the possibility of implementing a formal executive bonus plan or possibly a
deferred compensation plan. However, it was the consensus at both meetings
that salaries should remain at their existing levels pending further action by
the Committee and the full Board of Directors.
8
<PAGE>
The fifth and sixth meetings of the Compensation Committee for 1998 were
held on November 10 and December 15, 1998 at which executive salaries were
again reviewed in the context of the expanded duties and performance of each
officer and action taken to increase executive salaries for 1998 by $5,000
each.
Compensation Committee:
Jay L. Sedwick--Chairman
Charles E. Cole
Richard R. Kauffman
Charles E. Thomas, Jr.
Barton B. Williams
9
<PAGE>
The following Performance Graph provides Shareholders with a comparison of
the total return experienced by the Company in relation to the broad equity
market indexes shown thereon.
[GRAPH APPEARS HERE]
The above Performance Graph provides an indicator of cumulative total
shareholder returns over a five-year period for the Company (North Pittsburgh
Systems, Inc. (NPSI)) as compared with the National Association of Security
Dealers Automated Quotation System (NASDAQ) Composite Index and the Standard
and Poor's (S&P) Telephone Index. "Total shareholder returns" assumes the
reinvestment of dividends. The Graph also assumes that $100 was invested on
December 31, 1993 in NPSI, the S&P Telephone Index and the NASDAQ Index. For
example, NPSI's base of $100 at the beginning of the period, on a total return
basis, is calculated to be approximately $100 at the end of the five-year
period.
10
<PAGE>
Retirement Benefits Table. The following table illustrates estimated annual
benefits (average annual earnings multiplied by a benefit factor of 1.45%
multiplied by years of service) payable to Participants at their respective
retirement dates under the Company's Retirement Plan.
Retirement Benefits Table
<TABLE>
<CAPTION>
Average Annual Earnings Used Years of Service
as Basis for Computing -----------------------------------------------------------
Retirement Benefits 10 20 30 40
------------------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
$100,000 $14,500 $29,000 $43,500 $58,000
110,000 15,950 31,900 47,850 63,800
120,000 17,400 34,800 52,200 69,600
130,000 18,850 37,700 56,550 75,400
140,000 20,300 40,600 60,900 81,200
150,000 21,750 43,500 65,250 87,000
160,000 23,200 46,400 69,600 92,800
</TABLE>
- --------
Notes to Retirement Benefits Table:
(1) The compensation amounts paid to Mr. Brown, Mr. Kimble and Mr. Barthlow
for 1998 of $160,038, $137,993 and $124,585, respectively, as shown in the
Annual Compensation Salary column of the Executive Compensation Table, are
covered under the Company's Retirement Plan. Mr. Brown, Mr. Kimble and Mr.
Barthlow as of December 31, 1998 had accumulated 38.28, 22.65 and 21.44
years of credited service, respectively, under the Retirement Plan.
(2) Benefits listed in the Table are not subject to any deductions for Social
Security or other offset amounts.
(3) The Company's Retirement Plan (Retirement Plan) provides retirement
benefits to all full-time employees, age 21 and over, generally based on
average basic monthly compensation, excluding overtime earnings or other
amounts earned, during the highest sixty (60) months of employment. The
amount of contribution or accrual applicable to an individual in respect
to this defined benefit plan cannot be calculated readily. However, the
aggregate cash contribution required for the Retirement Plan year ended
October 31, 1998 was equal to 6.3% of the total covered remuneration of
all Participants in the Retirement Plan.
Directors' Compensation. During 1998, Directors of the Company, excluding
those holding offices with the Company, received $1,000 per month through May
and $1,200 per month thereafter as compensation for all services as a
Director. Charles E. Thomas, Sr., until his retirement on May 15, 1998,
received $24,542 for his services as both a Director and Chairman of the
Board. Charles E. Thomas, Jr., received $1,000 per month through May as a
Director and $2,400 per month thereafter for his services as both a Director
and Chairman of the Board. No further compensation was paid to Directors for
special or committee assignments.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Under the Company's Bylaws, the Board of Directors has the authority to
appoint a firm of accountants to conduct an annual examination of the
financial status, property and affairs of the Company. In accordance with such
authority, KPMG LLP, which has audited the financial statements of the Company
annually since 1952, has been appointed by the Board of Directors to provide
audit and tax services for the year ending December 31, 1999. As a
consequence, no recommendations will be made at the 1999 Annual Meeting in
respect to accountants and this matter will not be submitted for a vote at the
meeting.
A representative of KPMG LLP is expected to be present at the Annual
Meeting, will be given an opportunity to make a statement, if he/she so
desires, and will be available to respond to appropriate questions by
Shareholders.
11
<PAGE>
SHAREHOLDER PROPOSALS
Shareholder proposals intended for presentation at the 2000 Annual Meeting
must be received at the office of the Secretary, North Pittsburgh Systems,
Inc., 4008 Gibsonia Road, Gibsonia, PA 15044-9311 not later than December 27,
1999 in order to be eligible to be included in the Company's Proxy Statement
for that meeting. It is recommended that Shareholder proposals be sent to the
Company by Certified Mail, Return-Receipt Requested.
OTHER MATTERS
The Board of Directors knows of no business which will be presented for
consideration at the Annual Meeting other than that stated in the Notice of
Meeting. However, if any other business shall properly come before the
meeting, votes may be cast pursuant to the proxies solicited hereby in respect
to such other business in accordance with the best judgment of the person or
persons acting under the proxies.
Accompanying this Proxy solicitation material is a copy of the Company's
Annual Report for the year 1998, which includes the following audited
financial statements: Consolidated Balance Sheets as of December 31, 1998 and
1997, and for each of the years in the three-year period ended December 31,
1998, Consolidated Statements of Earnings, Consolidated Statements of
Shareholders' Equity and Comprehensive Income and Consolidated Statements of
Cash Flows. The Annual Report is submitted for the general information of the
Company's Shareholders and is not intended to induce, or for use in connection
with, any sale or purchase of securities of the Company, nor should it be
regarded as Proxy soliciting material or as a communication by means of which
any solicitation is made.
By Order of the Board of Directors
N. William Barthlow
Secretary
Dated: April 23, 1999
12
<PAGE>
Logo of
[North Pittsburgh Systems Inc.]
- --------------------------------------------------------------------------------
Logo of
[North Pittsburgh] 4008 Gibsonia Road, Gibsonia, PA 15044-9311 proxy
This proxy is solicited by the Board of Directors for use at the Annual Meeting
on May 21, 1999.
The shares of stock you hold in your account will be voted as you specify below.
If no choice is specified, the proxy will be voted "FOR" Item 1.
By signing the proxy, you revoke all prior proxies and appoint Harry R. Brown,
Allen P. Kimble, and Charles E. Cole, and each of them, with full power of
substitution, to vote your shares on the matters shown on the reverse side and
any other matters which may come before the Annual Meeting and all adjournments.
See reverse for voting instructions.
<PAGE>
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope
we've provided or return it to North Pittsburgh Systems, Inc., c/o Shareowner
Services, P.O. Box 64873, St. Paul, MN 55164-0873.
\/ Please detach here \/
The Board of Directors Recommends a Vote FOR Item 1.
1. Election of directors: 01 Harry R. Brown 05 David E. Nelsen
02 Charles E. Cole 06 Jay L. Sedwick
03 Allen P. Kimble 07 Charles E. Thomas, Jr.
04 Stephen G. Kraskin
[ ] Vote FOR [ ] Vote WITHHELD
all nominees from all nominees
- -------------------------------------------
- -------------------------------------------
(Instructions: To withhold authority to vote
for any indicated nominees, write the
number(s) of the nominee(s) in the
box provided to the right.)
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION
IS GIVEN, WILL BE VOTED FOR ALL NOMINEES IN ITEM 1.
---
Address Change? Mark Box [ ]
Indicate changes below:
Date
----------------------------------
- -------------------------------------------
- -------------------------------------------
Signature(s) in Box
Please sign exactly as your name(s) appear on Proxy. If held in joint tenancy,
all persons must sign. Trustees, administrators, etc. should include title and
authority. Corporations should provide full name of corporation and title of
authorized officer signing the proxy.
